Amighty heave, and James Kerry pushes the last of the cows into the barn for milking. "We work hard, you know," says the 27-year-old, wiping his brow and looking out across the valley. "But it's a great place to live."

Home for Kerry is Botton Village, a community for adults with special needs set in the heart of the North York Moors. Kerry is one of 130 people with some form of learning disability who live in the village alongside 100 permanently resident carers.

It is not just the population that makes this village different. Botton is a Steiner community, so every aspect of life, from farming to healthcare, is underpinned by the teachings of the Austrian philosopher. Its secluded location - Botton is several miles from the next village - and unconventional way of life give the place an air of intrigue, so that when you descend into the valley for the first time it's akin to entering a secret world.

Established in 1955, Botton is one of 11 village communities in Britain owned by the Camphill Village Trust. It is partly state-funded, but the community bears a closer resemblance to a kibbutz than a care facility. Disabled residents, or "villagers", as they are known, live in extended family homes together with carers, or "co-workers".

Everybody shares household chores and "families" sit down together three times a day to eat. People work on the farms and in the village's numerous craft workshops, but nobody gets a wage. Instead they receive a weekly allowance that covers basic needs, and have an equal stake in deciding how the community is run.

For all its differences, Botton feels like an ordinary village. At nine o'clock every morning, dozens of residents can be seen making their way to work along the winding dirt track that joins Botton's craft workshops. At the centre of the village is a bakery, creamery and a coffee house, which the villagers help manage. There's a church and a hall that doubles as a cinema, and entertainment is laid on every night of the week. There's also a thriving adult skills and education programme.

Fundamental to people's outlook is the belief that disability does not matter. And it seems to translate. After a few hours here, it is very easy to forget that Botton is a village for the learning disabled. "We don't label people here," insists one carer. "It's the person we see, not the disability."

However, not everything is as rosy as it seems. When Botton Village reaches its 50th anniversary next year, celebrations might be muted. The long-term future of such communities is far from secure. The head of the British Council of Disabled People (BCODP) says such village communities should be closed down and the government seems, at best, ambiguous about them.

The consensus, among the disability lobby at least, is that village communities are outmoded, and that the way forward is "supported living", where people are integrated into wider society. Nick Poole, village elder and spokesman at Botton Village, not surprisingly, finds such views frustrating.

"Why shouldn't village communities like ours be used as a model for future provisions?" says Poole, a 30-year resident. "We have 50 years' experience of caring for vulnerable people, and those who live here value us highly."

There are around 3,000 people living in 73 village communities in Britain. Few are as big as Botton, but all work on the principle that segregated community living benefits people with special needs. "People with learning disabilities have an enormous contribution to make, socially and humanly," adds Poole. "But in a competitive, intellectual climate they are disadvantaged. We are trying to create a way of life that does justice to their humanity."

The disability movement's opposition to such communities is based on the belief that segregation is ultimately harmful to achieving a just and equal society. Andy Rickell, director of BCODP, believes that segregation is the easy way out.

"I see no place for village communities, and I would like to see them closed down. Long term, I don't think they help anybody. They are acknowledging that the rest of society doesn't yet include people with learning difficulties. But instead of challenging this, they are accepting it and going elsewhere, so as not to bother anybody."

Richard Kramer is head of policy at social care charity Turning Point. He acknowledges that village communities have certain advantages, such as better access to daytime activities and a reduced risk of exposure to verbal abuse and crime. Nevertheless, he reinforces the message that supported living is the way forward.

"Village communities fall short of giving people complete choice and control over where they live," he says. "They don't promote independence."

Kramer adds that efforts should be focused on changing society to accommodate the needs of the vulnerable. "If we are serious about tackling negative attitudes towards people with learning disabilities and saying that they should have the same rights as everybody else, then living in a village community runs counter to that overall principle."

Or does it? Botton might in the middle of nowhere, but it is not completely isolated. In the past, the area was a secluded haven for the monks of Rosedale, and, later, for the Quaker families who had settled in the valley to escape the suspicion and heckling of town folk. In contrast, today's community is a driving force in the Whitby area. It generates a significant amount of trade and commerce for local busi ness, and plays host to several thousand visitors a year.

Botton has also kept up with the times. Its houses, workshops and facilities are built on modern designs; its people appear open minded and there's a strong international presence - I meet people from Eastern Europe, Germany and Singapore there. In other respects, the village is ahead of the game. It uses biodynamic agriculture (said to be healthier than organic farming), and a pioneering system of healthcare based on anthroposophy; Rudolph Steiner's belief that creative activities are psychologically valuable.

Given the government's reluctance to intervene in the debate, the long-term prospects of village communities is anybody's guess, says David Congdon, head of external relations at disability charity Mencap.

"The inference from Valuing People [the white paper on disability] is that the government is facing both ways," he says. "It certainly isn't saying that these communities should be stopped. Equally, there's no push from government to say you must go ahead and expand these facilities. Valuing People is underpinned by the values of integration, and supported living appears to be the basis upon which future services will be developed."

Rickell says it is time to call notice on village communities. "They under mine the steps we have taken to achieve greater acceptance of disabled people. Anything like this is grist to the mill for people who want to deny the right of disabled people to be included. That's the danger."

Poole has come to expect criticism for Botton's methods. "We hear some social workers say we are a metamorphosis of the old Victorian institution, locked away in a ghetto," he says. "Well, there is some truth in that, but as long as society is unwilling to offer real care and understanding to those who are vulnerable, places like this will be justified. If more of the values we espouse were accepted as mainstream, there would be no need for this place."

Botton certainly doesn't feel like an institution. You are unlikely to find sentimentality or pity towards people with special needs here. Everybody in the village seems to be treated with equal respect and shown dignity. The only patronising overtone I found was the view that television has a negative influence and a consensus had agreed that it should be banned.

"Wherever you live, there are good points and bad points," says Etienne Schröder, who is 44 and has been a villager at Botton for 20 years. "I have lived outside of this community for a long time, and, frankly, I am much happier here," he says, echoing the views of many villagers I meet.

"We say to our critics, 'Please come and visit us, open your eyes and look,'" says Poole. "In many respects, we are meeting the objectives or ideals of care in the community. People are respected, given space, independence, purpose, a meaningful way of life, a job to do. What else can we ask for?"

Organisations such as Mencap and Turning Point, however, cite supported living as the basis for future services, the crucial issue for them is the provision of good quality facilities.

"It's not so much which model is better, but what support package is in place to support the individual," says Kramer. "Wherever people live, it's vital they have the right housing and support package to meet their needs."

Whatever the future holds, life will carry on as normal in Botton Village, says Poole. "We don't feel vulnerable. We just feel very confident that what we're doing has validity and that it will eventually be recognised.

"You may say that's dewy-eyed, but it is just a conviction that what we are doing is needed, and that the people who live here are fulfilled. Not just that they are fed, have a roof over their head and lots of recreational opportunities. But that they are fulfilled at a deeper level as co-creators of this community."